20 schools account for $6.6 billion of U.S. government grad student loans

For-profit colleges are topping the charts when it comes to raking in graduate student loan money.

The Department of Education disbursed some $100 billion in student loans during the 2013/2014 academic year, according to a study by the Center for American Progress published in the Chronicle of Higher Education.

More than a third of that, approximately $35 billion, went to grad students. The 20 schools drawing the highest levels of federal loan dollars pulled in $6.6 billion, representing an astound 20% of the $35 billion total.

Perhaps more telling — half of the top 20 schools based on the amount of federal loan dollars received were for-profit institutions.

Topping the list was Walden University. It received $756 million in grad student loan money. Walden is owned by Laureate Education, the world’s largest for-profit education company. Some of its investors include KKR, the World Bank’s IFC, and Steve Cohen’s Point72 Asset Management. Laureate was reportedly eying going public sometime in 2016.

From 2010 to 2015, Bill Clinton was Laureate International Universities’ honorary chancellor. He stepped down in April and was replaced by former Mexican president Ernesto Zedillo.

The third-largest intitution on the list was the University of Phoenix owned by Apollo Education Group. It received $493 million in federal dollars loaned to grad students for the 2013/2014 academic year.

Two of the top 20 are medical schools in the Caribbean. St. George’s University’s medical school in Grenada took in $241 million dollars of American grad student loan money. Rescuing American med students at that school was the official reason why the U.S. invaded the island nation in 1983.

The study’s author, Elizabeth Baylor, warns that high debt payments threaten any income benefits a higher degree would provide. She said grad students at for-profit schools have a tougher time getting financial aid from those institutions and are thus in more danger of taking on large debt.

In April, Corinthian Colleges (COCOQ), which had been one of the largest for-profit schools at the time, closed its doors. Corinthian was under investigation for overcharging students and pushing students to lie in order to get more federal aid money.

The Department of Education is making debt relief available to many of Corinthian’s 74,000 former students. The total price tag could end up leaving the American taxpayer with a bill of $3.6 billion.

That has led to new oversight measures by the government, according to Baylor.

“The Department of Education has new rules out that look at for-profit colleges and will start to detail the amount of debt and the earnings of students who finish programs,” said Baylor to Yahoo Finance, adding that some of the pricier private non-profit schools may also have disappointing returns on investment for its grad students.

“We don’t actually have a ton of information about people who attend private colleges,” Baylor said. “Anecdotally, we think someone who goes to NYU or Georgetown or a prestigious school do fine. But in certain cases, there might be too many masters’ degrees that don’t have a clear career path attached to them. Students think it’s a great deal because it’s got a great name but it might turn out not to be in the long run.”

A study published this month by the Federal Reserve Bank of New York shows that higher tuitions may be the result of policies making it easier for students to borrow more money.

“Institutions more exposed to changes in the subsidized federal loan program increased their tuition disproportionately around these policy changes, with a sizable pass-through effect on tuition of about 65 percent,” wrote the New York Fed’s David O. Lucca, Taylor Nadauld, and Karen Shen.

But Baylor cautions against reducing total lending to grad schools. “In certain cases, it costs a lot of money to deliver a program,” she said. “In other cases, it might be an online program that is specifically designed to drive down the cost of delivering the education. What I would like to see is that if the delivery of the education has been made more efficient, then the price the student faces should also be lower.”